School of Economics

2012 Discussion Papers

 

School of Economics Discussion Paper 12/11

June 2012

 

The Financial Market Impact of

UK Quantitative Easing


Francis Breedon, Jagjit S. Chadha and Alex Waters

University of London and University of Kent

 

Abstract:

After outlining some of the monetary developments associated with Quantitative Easing (QE), we measure the impact of the UK'’s initial 2009-10 QE Programme on bonds and other assets. First, we use a macro-…finance yield curve both to create a counterfactual path for bond yields and to estimate the impact of QE directly. Second, we analyse the impact of individual QE operations on a range of asset prices. We fi…nd that QE signi…cantly lowered government bond yields through the portfolio balance channel – by around 50 or so basis points. We also uncover signi…cant effects of individual operations but limited pass through to other assets.

JEL Classification: E43; E44; E47; E58

 

Keywords: Term Structure of Interest Rates; Monetary Policy; Quantitative Easing

 


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